Micro 2/13 Study

A firms demand curve for labor is equal to a segment of its

marginal revenue product curve

Economics of scale exist when

Long-run average total cost decreases as output increases

Marginal revenue product is defined as the

change in total revenue that occurs when one additional unit of an input is employed

Locktek produces toy trains and pays each worker $350 per week. Five workers can produce 40 trains per week and six workers can produce 45 trains per week. The marginal product per week of the sixth worker is

5 trains

Assume that a monopolist is producing in the inelastic portion of its demand curve. Which of the following will occur if the monopolist decreases its price?

Both total revenue and profits will decrease

Which of the following is true if a monopolist's marginal revenue is negative at the current level of output?

Demand for its product is price inelastic

Which of the following statements is true for both monopolistically competitive firm and a perfectly competitive firm in long-run profit maximizing equilibrium?

Economic profits equal zero, and marginal revenue equals marginal cost

Which of the following best describes the relationship between the average total cost curve and the marginal cost curve in the short run?

If the average total cost curve is rising, the marginal cost curve is above the average total cost curve.

At the current production level of good X, price is greater than marginal cost. Which of the following actions would lead to greater efficiency?

Increasing the production of good X

Which of the following statements about a monopolistically competitive firm in long-run equilibrium is true?

It has excess capacity and its output price exceeds is marginal cost, even though its long run profit is zero

At the current output level, a firm finds that it has the potential to increase its profit by expanding output. If P = price, MR = marginal revenue, and MC = marginal cost, which of the following must hold at the current output for the firm?

MR > MC

Which of the following is true of a monopolistically competitive firm in long run equilibrium?

Marginal revenue is equal to marginal cost, and price is equal to average total cost.

Which of the following is true of both monopolistically competitive and perfectly competitive firms in long run equilibrium?

Price equals average total cost

If positive externalities exist in the market for flu shots, which of the following is true?

Subsidizing flu shots will lead to the socially efficient level of output

Which of the following will occur if the government imposes a price ceiling below the equilibrium price of a good?

There will be a shortage in the market.

If government regulators set prices such that a natural monopolist earns only normal profits, prices will be equal to

average total cost

Marginal cost is defined as the

change in total cost resulting from producing an additional unit of output

As new firms enter a monopolistically competitive market, profits of existing firms

decline and product diversity in the market increases.

A monopoly is different from a perfectly competitive firm in that a monopoly

has a marginal revenue curve that lies below its demand curve

Game theory is a useful model to explain the behavior of firms in a market when the firms are

interdependent

Generally monopolies are considered inefficient because they

lead to an underallocation of resources in the affected market

A single price monopolist's marginal revenue is

less than its price

To correct for positive externalities, the government should

pay a subsidy equal to the marginal external benefit

As firms exit a monopolistically competitive market, profits of remaining firms

rise and product diversity in the market decreases.

In monopolistically competitive markets, economic losses

suggest that some existing firms will exit the market.

Assume that a profit maximizing monopoly is charging a single price. If the monopoly can price discriminate and charge each consumer what he or she is willing to pay, which of the following will occur?

The quantity of output produced will increase